Reader’s Question:

I’m thinking of getting either a trust fund or a life insurance for my 5-year old daughter here in New York. Which one would be better?

Seth

Brookhaven, NY

This is a very interesting question. What you want is to invest money for your daughter’s financial future. What you need to know now is that no matter how much any life insurance agent there in New York tells you otherwise, a life insurance policy is just not the best type of long-term investment. If you are thinking about stashing away money for college needs or as a cash gift for her in the future, there are far better investment options available out there such as a 529 savings plan.

Although it would probably make more sense to get a whole life insurance policy for your daughter right now, while premiums are extremely low, so that your daughter is guaranteed life insurance coverage in case she develops any unhealthy habits or contracts any disease or even medical conditions that might make it prohibitively expensive, to next-to-impossible to get life insurance coverage for her in the future, or maybe you just want to make sure that burial costs are covered in case your daughter dies (sounds morbid, doesn’t it?). Other than that, unless the child is the main income provider in the family, there really isn’t any point on getting life insurance coverage for children.

A trust funds sounds better, or a college educational plan. You should think more about getting life insurance for you since your daughter would probably need that more in case you suddenly pass away.

Tags: life insurance advise, life insurance information, whole life insurance, term life insurance